Chapter 20: Simple Reproduction

Part 1

I. The Formulation of the Question

If we study the annual function of social capital — hence of the total
capital of which the individual capitals form only fractional parts,
whose movement is their individual movement and simultaneously
integrating link in the movement of the total capital — and its results, i.e.,
if we study the commodity-product furnished by society during the year,
then it must become apparent how the process of reproduction of the
social capital takes place, what characteristics distinguish this process of
reproduction from the process of reproduction of an individual capital,
and what characteristics are common to both. The annual product includes
those portions of the social product which replace capital, namely
social reproduction, as well as those which go to the consumption-fund,
those which are consumed by labourers and capitalists, hence both
productive and individual consumption. It comprises also the
reproduction (i.e., maintenance) of the capitalist class and the working-class,
and thus the reproduction of the capitalist character of the entire
process of production.

It is evidently the circulation formula

which we have to analyse, and consumption necessarily plays a role in
it; for the point of departure, C' = C + c, the commodity-capital
embraces both the constant and variable capital-value, and the surplus-value.
Its movement therefore includes both individual and productive
consumption. In the circuits M — C ... P... C'— M' and P ... C'— M'— C ... P, the movement of the capital is the starting and finishing point. And of course this includes consumption, for the commodity, the product,
must be sold. When this has assumedly been done it is immaterial for
the movement of the individual capital what becomes of the
commodities subsequently. On the other hand in the movement of C' ...
C' the conditions of social reproduction are discernible precisely from the
fact that it must be shown what becomes of every portion of value of this
total product, C'. In this case the total process of reproduction includes
the process of consumption brought about by the circulation quite as
much as the process of reproduction of the capital itself.

For our present purpose this process of reproduction must be studied
from the point of view of the replacement of the value as well as the
substance of the individual component parts of C'. We cannot rest
content any longer, as we did in the analysis of the value of the product
of the individual capital, with the assumption that the individual
capitalist can first convert the component parts of his capital into money
by the sale of his commodities, and then reconvert them into productive
capital by renewed purchase of the elements of production in the
commodity-market. Inasmuch as those elements of production are by
nature material, they represent as much a constituent of the social
capital as the individual finished product, which is exchanged for them
and replaced by them. Contrariwise the movement of that portion of the
social commodity-product which is consumed by the labourer in
expending his wages, and by the capitalist in expending his surplus-value,
not only forms an integral part of the movement of the total
product but intermingles with the movements of the individual capitals,
and therefore this process cannot be explained by merely assuming it.

The question that confronts us directly is this: How is the capital
consumed in production replaced in value out of the annual product and
how does the movement of this replacement intertwine with the
consumption of the surplus-value by the capitalists and of the wages by
the labourers? It is then first a matter of reproduction on a simple scale.
It is furthermore assumed that products are exchanged at their values
and also that there is no revolution in the values of the component parts
of productive capital. The fact that prices diverge from values cannot,
however, exert any influence on the movements of the social capital. On
the whole, there is the same exchange of the same quantities of products,
although the individual capitalists are involved in value-relations no
longer proportional to their respective advances and to the quantities of
surplus-value produced singly by every one of them. As for revolutions in
value, they do not alter anything in the relations between the value-components
of the total annual product, provided they are universally
and evenly distributed. To the extent however that they are partially and
unevenly distributed, they represent disturbances which, in the first
place, can be understood as such only as far as they are regarded as
divergences from unchanged value-relations, but in the second place, once there is proof of the law according to which one portion of the value
of the annual product replaces constant, and another portion variable
capital, a revolution either in the value of the constant or that of the
variable capital would not alter anything in this law. It would change
merely the relative magnitudes of the portions of value which function in
the one or the other capacity, because other values would have taken
the places of the original ones.

So long as we looked upon the production of value and the value of
the product of capital individually, the bodily form of the commodities
produced was wholly immaterial for the analysis, whether it was
machines, for instance, corn, or looking glasses. It was always but a
matter of illustration, and any branch of production could have served
that purpose equally well. What we dealt with was the immediate
process of production itself, which presents itself at every point as the
process of some individual capital. So far as the reproduction of capital
was concerned, it was sufficient to assume that that portion of the
product in commodities which represents capital-value finds an
opportunity in the sphere of circulation to reconvert itself into its
elements of production and thus into its form of productive capital; just
as it sufficed to assume that both the labourer and the capitalist find in
the market those commodities on which they spend their wages and the
surplus-value. This merely formal manner of presentation is no longer
adequate in the study of the total social capital and of the value of its
products. The reconversion of one portion of the value of the product into
capital and the passing of another portion into the individual
consumption of the capitalist as well as the working-class form a
movement within the value of the product itself in which the result of the
aggregate capital finds expression; and this movement is not only a
replacement of value, but also a replacement in material and is therefore
as much bound up with the relative proportions of the value-components
of the total social product as with their use-value, their material shape.
Simple reproduction, reproduction on the same scale, appears as an
abstraction, inasmuch as on the one hand the absence of all
accumulation or reproduction on an extended scale is a strange
assumption in capitalist conditions, and on the other hand conditions of
production do not remain exactly the same in different years (and this is
assumed). The assumption is that a social capital of a given magnitude
produces the same quantity of commodity-value this year as last, and
supplies the same quantum of wants, although the forms of the
commodities may change in the process of reproduction. However, as far
as accumulation does take place, simple reproduction is always a part of
it, and can therefore be studied by itself, and is an actual factor of
accumulation. The value of the annual product may decrease, although
the quantity of use-values may remain the same; or the value may
remain the same although the quantity of the use-values may decrease;
or the quantity of value and of the reproduced use-values may decrease
simultaneously. All this amounts to reproduction taking place either
under more favourable conditions than before or under more difficult
ones, which may result in imperfect — defective — reproduction. All this
can refer only to the quantitative aspect of the various elements of
reproduction, not to the role which they play as reproducing capital or as
a reproduced revenue in the entire process.

II. The Two Departments of Social Production

The total product, and therefore the total production, of society may
be divided into two major departments:

I. Means of Production, commodities having a form in which they must, or at least may, pass into productive consumption.

II. Articles of Consumption, commodities having a form in which they pass into the individual consumption of the capitalist and the working-class.

All the various branches of production pertaining to each of these two
departments form one single great branch of production, that of the
means of production in the one case, and that of articles of consumption
in the other. The aggregate capital employed in each of these two
branches of production constitutes a separate large department of the
social capital.

In each department the capital consists of two parts:

1) Variable Capital. This capital, so far as its value is concerned, is equal to the value of the social labour-power employed in this branch of production; in other words, it is equal to the sum of the wages paid for
this labour-power. So far as its substance is concerned, it consists of the
labour-power in action, i.e., of the living labour set in motion by this
capital-value.

2) Constant Capital. This is the value of all the means of production employed for productive purposes in this branch. These, again, are
divided into fixed capital, such as machines, instruments of labour,
buildings, labouring animals, etc., and circulating constant capital, such
as materials of production: raw and auxiliary materials, semi-finished
products, etc.

The value of the total annual product created with the aid of this
capital in each of the two departments consists of one portion which
represents the constant capital c consumed in the process of production
and only transferred to the product in accordance with its value, and of
another portion added by the entire labour of the year. This latter portion
is divided in turn into the replacement of the advanced variable capital v
and the excess over and above it, which forms the surplus-value s. And
just as the value of every individual commodity, that of the entire annual
product of each department consists of c + v + s.

Portion c of the value, representing the constant capital consumed in
production, does not coincide with the value of the constant capital
employed in production. True, the materials of production are entirely
consumed and their values completely transferred to the product. But
only a portion of the employed fixed capital is wholly consumed and its
value thus transferred to the product. Another part of the fixed capital,
such as machines, buildings, etc., continues to exist and function the
same as before, though depreciated to the extent of the annual wear and
tear. This persistent portion of the fixed capital does not exist for us,
when we consider the value of the product. It is a portion of the capital-value,
which exists independently and alongside of this newly produced
commodity-value. This was shown previously in the analysis of the value
of the product of individual capital (Vol. I, Ch. VIII.). However, for the
present we must leave aside the method of analysis employed there. We
saw in the study of the value of the product of individual capital that the
value of which the fixed capital was shorn through wear and tear is
transferred to the product created during the time of wear, irrespective of
whether or not any portion of this fixed capital is replaced in kind during
this time out of the value thus transferred. At this point in the study of
the total social product and of its value, however, we are compelled, at
least for the present, to leave out of account that portion of value which
is transferred from the fixed capital to the annual product by wear and
tear, unless fixed capital is replaced in kind during the year. In one of
the following sections of this chapter we shall discuss this point in
particular.

We shall base our study of simple reproduction on the following
scheme, in which c stands for constant capital, v for variable capital,
and s for surplus-value, assuming the rate of surplus-value s/v to be 100
per cent. The figures may indicate millions of marks, francs, or pounds
sterling.

Total value 9,000, exclusive of the fixed capital persisting in its
natural form, according to our assumption.

If we were now to examine the transformations necessary on the
basis of simple reproduction, where the entire surplus-value is
unproductively consumed, and leave aside for the present the money-circulation
that brings them about, we should obtain at the outset three
great points of support.

1) The 500v, representing wages of the labourers, and 500s,
representing surplus-value of the capitalists, in department II, must be
spent for articles of consumption. But their value exists in articles of
consumption worth 1,000, held by the capitalists of department II,
which replace the advanced 500v and represent the 500s. Consequently the wages and surplus-value of department II are exchanged within this
department for products of this same department. Thereby articles of
consumption to the amount of (500v + 500s) II = 1,000, drop out of the total product.

2) The 1,000v plus 1,000s of department I must likewise be spent for articles of consumption; in other words, for products of department II.
Hence they must be exchanged for the remainder of this product equal
to the constant capital part, 2,000c. Department II receives in return an
equal quantity of means of production, the product of I, in which the
value of 1,000v + 1,000s of I is incorporated. Thereby 2,000 IIc and (1,000v +1,000s) I drop out of the calculation.

3) There still remain 4,000 Ic. These consist of means of production
which can be used only in department I to replace its consumed
constant capital, and are therefore disposed of by mutual exchange
between the individual capitalists of I, just as the (500v + 500s) II by an exchange between the labourers and capitalists, or between the individual capitalists of II.

Let this serve for the moment to facilitate the understanding of what
follows.

III. Exchange between the Two Departments I(v + s) versus IIc

We begin with the great exchange between the two classes. (1,000v
+ 1,000s) I — these values consisting, in the hands of their producers, of means of production in their natural form, are exchanged for 2,000 IIc,
for values consisting of articles of consumption in their bodily form. The
capitalist class of II thereby reconverts its constant capital of 2,000 from
the form of articles of consumption into that of means of production of
articles of consumption, into a form in which it can once more function
as a factor of the labour-process and for purposes of self-expansion of
value as constant capital-value. On the other hand the equivalent of the
labour-power of I (1,000v) and the surplus-value of the capitalists of I
(1,000s) are realised thereby in articles of consumption; both of them
are converted from their bodily form of means of production into a bodily
form in which they can be consumed as revenue.

Now, this mutual exchange is accomplished by means of a circulation
of money, which promotes it just as much as it renders its
understanding difficult, but which is of decisive importance because the
variable portion of capital must ever resume the form of money, as
money-capital converting itself from the form of money into labour-power.
The variable capital must be advanced in the form of money in
all branches of production carried on at the entire periphery of society
simultaneously alongside each other, regardless of whether they belong
to category I or II. The capitalist buys the labour-power before it enters
into the process of production, but pays for it only at stipulated times,
after it has been expended in the production of use-values. He owns,
together with the remainder of the value of the product, also that portion
of it which is only an equivalent for the money expended in the payment
of labour-power, that portion of the value of the product which
represents variable capital. In this portion of value the labourer has
already supplied the capitalist with the equivalent of his wages. But it is
the reconversion of commodities into money, their sale, which restores
to the capitalist his variable capital in the form of money-capital, which
he may advance once more for the purchase of labour-power.

In department I, then, the aggregate capitalist has paid £1,000 (I say
£ solely to indicate that it is value in the form of money), equal to
1,000v, to the labourers for the value of product I already existing as the
v-portion, i.e., of the means of production created by them. With these
£1,000 the labourers buy articles of consumption of the same value
from capitalists II, thereby converting one half of the constant capital II
into money; capitalists II, in their turn, buy with these £1,000 means of
production, valued at 1,000, from capitalists I; thereby, as far as the
latter are concerned, the variable capital-value equal to 1,000v, which,
being part of their product, existed in the bodily form of means of
production, is thus reconverted into money and can now function anew
in the hands of capitalists I as money-capital, which is transformed into
labour-power, hence into the most essential element of productive
capital. In this way their variable capital flows back to them in the form
of money, as a result of the realisation of some of their commodity-capital.

As for the money required to exchange the s-portion of commodity-capital
I for the second half of constant capital II, it may be advanced in
various ways. In reality this circulation embraces innumerable separate
purchases and sales by the individual capitalists of both categories, the
money coming in any event from these capitalists, since we have already
accounted for the money put into circulation by the labourers. A
capitalist of category II can buy, with the money-capital he has besides
his productive capital, means of production from capitalists of category I,
and, vice versa, a capitalist of category I can buy, with money-funds
assigned for personal and not for capital expenditure, articles of
consumption from capitalists of category II. A certain supply of money,
to be used either for the advancement of capital or for the expenditure of
revenue must under all circumstances be assumed to exist beside the
productive capital in the hands of the capitalists, as we have shown
above in parts I and II. Let us assume — the proportion is wholly
immaterial for our purpose — that one half of the money is advanced by
capitalists II in the purchase of means of production for the replacement
of their constant capital, while the other half is spent by capitalists I for
articles of consumption. In that case department II advances £500 for
the purchase of means of production from department I, thereby
replacing (inclusive of the above £1,000 coming from the labourers of
department I) three-quarters of its constant capital in kind, with the
£500 so obtained department I buys articles of consumption from II,
thereby completing for one half of the s-portion of its commodity-capital
the circulation c — m — c, and thus realising its product in the
consumption-fund. By means of this second process the £500 return to
the hands of II as money-capital existing beside its productive capital.
On the other hand I expends money to the amount of £500 for the
purchase of II’s articles of consumption in anticipation of the sale of that
half of the s-portion of its commodity-capital which is still lying in store
as product. With the same £500 II buys from I means of production,
thereby replacing in kind its entire constant capital
(1,000 + 500 + 500 = 2,000) while I realises its entire surplus-value in
articles of consumption. On the whole, the entire exchange of
commodities in the amount of £4,000 would be effected with a money-circulation
of £2,000 which amount is attained only because the entire
annual product is described as exchanged in bulk, in a few large lots.
The important point here is that II has not only reconverted its constant
capital reproduced in the form of articles of consumption, into the form
of means of production, but has besides recovered the £500 which it
had advanced to the circulation for the purchase of means of production;
and that, similarly, I again possesses not only its variable capital, which
it had reproduced in the form of means of production, in money-form, as
money-capital once more directly convertible into labour-power, but also
the £500 expended in the purchase of articles of consumption in
anticipation of the sale of the s-portion of its capital. These £500 flow
back to it not because of the expenditure incurred, but because of the
subsequent sale of a part of its commodity-product incorporating one
half of its surplus-value.

In both cases it is not only that the constant capital of II is
reconverted from the form of a product into the bodily form of means of
production, in which alone it can function as capital; and likewise it is
not only that the variable portion of the capital of I is converted into its
money-form, and the surplus-value portion of the means of production of
I into its consumable form, the form in which it can be used as revenue.
It is also that the £500 of money-capital, advanced by II in the purchase
of means of production prior to selling the corresponding compensating
portion of the value of its constant capital – existing in the form of means
of consumption – flow back to II; and furthermore back to I flow the £500
which were expended anticipando by it for the purchase of articles of
consumption. If the money advanced by II at the expense of the constant
portion of its commodity-product, and by I at the expense of the surplus-value
portion of its commodity-product, flows back to them, this is solely
because the one class of capitalists throws £500 into circulation over
and above the constant capital existing in the form of commodities in II,
and the other class a like amount over and above the surplus-value
existing in the form of commodities in I. In the last analysis the two
departments have mutually paid one another in full by the exchange of
equivalents in the shape of their respective commodities. The money
thrown into circulation by them in excess of the values of their
commodities, as a means of effecting the exchange of these
commodities, returns to each one of them out of the circulation in
proportion to the quota which each of the two had thrown into
circulation. Neither has grown a farthing richer thereby. I possessed a
constant capital of 2,000 in the form of articles of consumption plus
500 in money; now it possesses 2,000 in means of production plus 500
in money, the same as before; in the same way I possesses, as before, a
surplus-value of 1,000 (consisting of commodities, means of production,
now converted into a consumption-fund) plus 500 in money. The
general conclusion is this: Of the money which the industrial capitalists
throw into circulation to accomplish their own commodity circulation,
whether at the expense of the constant part of the commodity-value or at
the expense of the surplus-value existing in the commodities to the
extent that it is laid out as revenue, as much returns into the hands of
the respective capitalists as was advanced by them for the money-circulation.

As for the reconversion of the variable capital of class I into the form
of money, this capital, after the capitalists of I invested it in wages,
exists for them first in the form of commodities in which the labourers
delivered it to them. They paid this capital in the form of money to these
labourers as the price of their labour-power. To this extent the capitalists
have paid for that constituent part of the value of their commodity-product
which is equal to the variable capital expended in the form of
money. They are, for this reason, the owners of this portion of the
commodity-product as well. But that part of the working-class which is
employed by them does not buy the means of production created by it;
these labourers buy articles of consumption produced by II. Hence the
variable capital advanced by the capitalists of I in the payment of labour-power
does not return to them directly. It passes by means of purchases
made by the labourers into the hands of the capitalist producers of the
commodities necessary for and within the reach of working folks; in
other words, it passes into the hands of capitalists II. And not until these
expend the money in the purchase of means of production does it return
by this circuitous route into the hands of capitalists I.
It follows that, on the basis of simple reproduction, the sum of the
values of v + s of the commodity-capital of I (and therefore a
corresponding proportional part of the total commodity-product of I)
must be equal to the constant capital IIc, which is likewise taken as a
proportional part of the total commodity-product of department II; or
I(v + s) = IIc.

IV. Exchange within Department II.
Necessities of Life and Articles of Luxury

Of the value of the commodity-product of department II there still
remain to be studied the constituents v plus s. This analysis has nothing
to do with the most important question which occupies our attention
here, namely to what extent the division of the value of every individual
capitalist commodity-product into c + v + s — even if brought about by
different forms of appearance — applies also to the value of the total
annual product. This question finds its answers on the one hand in the
exchange of I(v + s) for IIc, and on the other hand in the investigation, to be made later, of the reproduction of I in the annual product of I. Since
II(v + s) exists in the bodily form of articles of consumption; since the
variable capital advanced to the labourers in payment of their labour-power
must generally speaking be spent by them for articles of
consumption; and since the s-portion of the value of commodities, on
the assumption of simple reproduction, is practically spent as revenue
for articles of consumption, it is prima facie evident that the labourers II
buy back, with the wages received from the capitalists II, a portion of
their own product, corresponding to the amount of the money-value
received as wages. Thereby the capitalist class II reconverts the money-capital
advanced by it in the payment of labour-power into the form of
money. It is quite the same as if it had paid the labourers in mere value
tokens. As soon as the labourers would realise these value tokens by the
purchase of a part of the commodities produced by them but belonging
to the capitalists, these tokens would return into the hands of the
capitalists. Only, these tokens do not merely represent value but possess
it, in golden or silver embodiment. We shall analyse in greater detail
later on this sort of reflux of variable capital advanced in the form of
money by means of a process in which the working-class appears as the
purchaser and the capitalist class as the seller. Here however a different
point is at issue, which must be discussed in connection with this return
of the variable capital to its point of departure.

Category II of the annual production of commodities consists of a
great variety of branches of production, which may, however, be divided
into two great sub-divisions by their products.

a) Articles of consumption, which enter into the consumption of the
working-class, and, to the extent that they are necessities of life — even if
frequently different in quality and value from those of the labourers —
also form a portion of the consumption of the capitalist class. For our
purposes we may call this entire sub-division consumer necessities,
regardless of whether such a product as tobacco is really a consumer
necessity from the physiological point of view. It suffices that it is
habitually such.

b) Articles of luxury, which enter into the consumption of only the
capitalist class and can therefore be exchanged only for spent surplus-value,
which never falls to the share of the labourer.

As far as the first category is concerned it is obvious that the variable
capital advanced in the production of the commodities belonging in it
must flow back in money-form directly to that portion of the capitalist
class II (i.e., the capitalists IIa) who have produced these necessities of
life. They sell them to their own labourers to the amount of the variable
capital paid to them in wages. This reflux is direct so far as this entire
sub-division a of capitalist class I is concerned, no matter how numerous
the transactions may be between the capitalists of the various pertinent
branches of industry, by means of which the returning variable capital is
distributed pro rata. These are processes of circulation, whose means of
circulation are supplied directly by the money expended by the
labourers. It is different, however, with sub-division IIb. The entire
portion of the value produced in this sub-division, IIb(v + s), exists in the
bodily form of articles of luxury, i.e., articles which the labouring class
can buy no more than it can buy commodity-value I existing in the form
of means of production, notwithstanding the fact that both the articles of
luxury and the means of production are the products of these labourers.

Hence the reflux by which the variable capital advanced in this subdivision
returns to the capitalist producers in its money-form cannot be
direct but must be mediated, as in the case of Iv.

Let us assume for instance that v = 500 and s = 500, as they did in
the case of the entire class II; but that the variable capital and the
corresponding surplus-value are distributed as follows:

The labourers of IIb have received 100 in money as payment for their
labour-power, or say £100. With this money they buy articles of
consumption from capitalists IIa to the same amount. This class of
capitalists buys with the same money £100 worth of the IIb
commodities, and in this way the variable capital of capitalists IIb flows
back to them in the form of money.

In IIa there are available once more 400v in money, in the hands of
the capitalists, obtained by exchange with their own labourers. Besides,
a fourth of the part of the product representing surplus-value has been
transferred to the labourers of IIb, and in exchange IIb (100v) have been
received in the form of articles of luxury.

Now, assuming that the capitalists of IIa and IIb divide the
expenditure of their revenue in the same proportion between necessities
of life and luxuries — three-fifths for necessities for instance and two-fifths
for luxuries — the capitalists of sub-class IIa will spend three-fifths of
their revenue from surplus-value, amounting to 400s, or 240, for their
own products, necessities of life, and two-fifths, or 160, for articles of
luxury. The capitalists of sub-class IIb will divide their surplus-value of
100s in the same way: three-fifths, or 60, for necessities, and two-fifths,
or 40, for articles of luxury, the latter being produced and exchanged in
their own sub-class.

The 160 in articles of luxury received by (IIa)s pass into the hands of
the IIa capitalists in the following manner: As we have seen, 100 of the
(IIa) 400s were exchanged in the form of necessities of life for an equal
amount of (IIb)v, which exists as articles of luxury, and another 60,
consisting of necessities of life, for (IIb) 60s, consisting of luxuries. The
total calculation then stands as follows:

IIa: 400v + 400s; IIb: 100v + 100s

1) 400v (a) are consumed by the labourers of IIa, a part of whose
product (necessities of life) they form. The labourers buy them from the
capitalist producers of their own sub-division. These capitalists thereby
recover £400 in money, which is the value of their variable capital of
400 paid by them to these same labourers as wages. They can now
once more buy labour-power with it.

2) A part of the 400s (a), equal to the 100v (b), one-fourth of the surplus-value (a), is realised in luxuries in the following way: The
labourers (b) received from the capitalists of their sub-division (b) £100
in wages. With this amount they buy one-fourth of the surplus-value (a),
i.e., commodities consisting of necessities of life. With this money the
capitalists of (a) buy articles of luxury to the same amount, which equals
100v (b), or one half of the entire output of luxuries. In this way the b
capitalists get back their variable capital in the form of money and are
enabled to resume reproduction by again purchasing labour-power, since
the entire constant capital of the whole category II has already been
replaced by the exchange of I(v + s) for IIc. The labour-power of the luxury workers is therefore saleable anew only because the part of their own
product created as an equivalent for their wages is drawn by capitalists
IIa into their consumption-fund, is turned into money. (The same applies
to the sale of the labour-power of I, since the II for which I(v + s) is
exchanged, consists of both articles of luxury and necessities of life, and
that which is renewed by means of I(v + s) constitutes the means of
production of both luxuries and necessities.)

3) We now come to the exchange between a and b, which is merely
exchange between the capitalists of the two sub-divisions. So far we
have disposed of the variable capital (400v) and part of the surplus-value
(100s) in a, and the variable capital (100v) in b. We have
furthermore assumed that the average proportion of the expenditure of
the capitalist revenue was in both classes two-fifths for luxuries and
three-fifths for necessities. Apart from the 100 already expended for
luxuries, the entire subdivision a still has to be allotted 60 for luxuries,
and b has proportionately to be allotted 40.

(IIa)s is then divided into 240 for necessities and 160 for luxuries, or
240 + 160 = 400, (IIa).

(IIb)s is divided into 60 for necessities and 40 for luxuries; 60 + 40
= 100, (IIb). The last 40 are consumed by this class out of its own
product (two-fifths of its surplus-value); the 60 in necessities are
obtained by this class through the exchange of 60 of its surplus-value for
60, (a).

We have, then, for the entire capitalist class II the following (v plus s
in sub-division [a] consisting of necessities, in [b] of luxuries):
IIa (400v + 400s) + IIb (100v + 100s) = 1,000; by this movement there is thus realised: 500v (a + b) [realised in 400v (a) and 100s (a)] + 500s (a + b) [realised in 300s (a) + 100v (b) + 100s (b)] =1,000.
For a and b, each considered by itself, we obtain the following realisation:

a) v / ( 400v(a) ) + s / (240s(a) + 100s(a) + 60s(b)) = 800

b) v / ( 100s(a) ) + s / (60s(a) + 40s(a) + ...) = (200 / 1000)

If, for the sake of simplicity, we assume the same proportion between the variable and constant capital (which, by the way, is not at all necessary), we obtain for 400v (a) a constant capital of 1,600, and for 100v (b) a constant capital of 400. We then have the following two subdivisions, a and b, in II:

IIa) 1,600c + 400v + 400s = 2,400
IIb) 400c + 100v + 100s = 600

adding up to

2,000c + 500v + 500s = 3,000

Accordingly, 1,600 of the 2,000 IIc in articles of consumption, which are exchanged for 2,000 I(v + s), are exchanged for means of production of necessities of life and 400 for means of production of luxurites.

The 2,000 I(v + s) would therefore break up into (800v + 800s) I for a, equal to 1,600 means of production of necessities of life, and (200v + 200s) I for b, equal to 400 means of production of luxuries.

A considerable part of the instruments of labour as such, as well as of the raw and auxiliary materials, etc., is the same for both departments. But so far as the exchange of the various portions of value of the total product I(v + s) is concerned, such a division would be wholly immaterial. Both the above 800v of I and the 200v of I are realised because the wages are spent for articles of consumption 1,000 IIc; hence the money-capital
advanced for this purpose is distributed evenly on its return
among the capitalist producers of I, their advanced variable capital is
replaced pro rata in money. On the other hand, so far as the realisation
of the 1,000 Is is concerned, the capitalists will here likewise draw
uniformly (in proportion to the magnitude of their s) 600 IIa and 400 IIb
in means of consumption out of the entire second half of IIc, equal to
1,000; consequently those who replace the constant capital of IIa will
draw.

480 (three-fifths) out of 600c (IIa) and 320 (two-fifths) out of 400c (IIb), a total of 800; those who replace the constant capital of IIb will
draw.

120 (three-fifths) out of 600c (IIa) and 80 (two-fifths) out of 400c (IIb), which equals 200. Grand total, 1,000.

What is arbitrary here is the ratio of the variable to the constant
capital of both I and II and so is the identity of this ratio for I and II and
their sub-divisions. As for this identity, it has been assumed here merely
for the sake of simplification, and it would not alter in any way the
conditions of the problem and its solution if we were to assume different
proportions. However, the necessary result of all this, on the assumption
of simple reproduction, is the following.

1) That the new value created by the labour of one year (divisible into
v + s) in the bodily form of means of production is equal to the value of
the constant capital c contained in the value of the product created by
the other part of the annual labour and reproduced in the form of articles
of consumption. If it were smaller than IIc, it would be impossible for II
to replace its constant capital entirely; if it were greater, a surplus would
remain unused. In either case, the assumption of simple reproduction
would be violated.

2) That in the case of annual product which is reproduced in the form
of articles of consumption, the variable capital v advanced in the form of
money can be realised by its recipients, inasmuch as they are labourers
producing luxuries, only in that portion of the necessities of life which
embodies for their capitalist producers prima facie their surplus-value;
hence that v, laid out in the production of luxuries, is equal in value to a
corresponding portion of s produced in the form of necessities of life, and
hence must be smaller than the whole of this s, namely (IIa)s, and that
the variable capital advanced by the capitalist producers of luxuries
returns to them in the form of money only by means of the realisation of
that v in this portion of s. This phenomenon is quite analogous to the
realisation of I(v + s) in IIc, except that in the second case (IIb)v realizes itself in a part of (IIa)s of the same value. These proportions remain qualitatively determinant in every distribution of the total annual product, since it actually enters into the process of the annual reproduction
brought about by circulation. I(v + s) can be realised only in IIc, just as IIc can only be renewed in function as a component part of productive capital by means of this realisation; in the same way, (IIb)v can be realised only in a portion of (IIa)s and (IIb)v can only thus be reconverted into the form of money-capital. It goes without saying that this applies only to the extent that it all is really a result of the process of reproduction itself, i.e., to the extent that the capitalists of IIb, for
instance, do not obtain money-capital for v on credit from others.
Quantitatively however the exchanges of the various portions of the
annual product can take place in the proportions indicated above only so
long as the scale and value-relations in production remain stationary and
so long as these strict relations are not altered by foreign commerce.

Now, if we were to say after the manner of Adam Smith that I(v + s)
resolve themselves into IIc, and IIc resolves itself into I(v + s), or, as he used to say more frequently and still more absurdly, I(v + s) constitute component parts of the price (or “value in exchange,” as he has it) of II and II constitutes the entire component part of the value of I(v + s), then one could and should likewise say that (IIb)v resolves itself into (IIa)s, or
(IIa)s into (IIb)v, or (IIb)v forms a component part of the surplus-value of IIa, and, vice versa, the surplus-value thus resolves itself into wages, or into variable capital, and the variable capital forms a “component part” of the surplus-value. This absurdity is indeed found in Adam Smith,
since with him wages are determined by the value of the necessities of
life, and these commodity-values in their turn by the value of the wages
(variable capital) and surplus-value contained in them. He is so
absorbed in the fractional parts into which the value-product of one
working-day is divided on the basis of capitalism — namely into v plus
s — that he quite forgets that it is immaterial in simple commodity
exchange whether the equivalents existing in various bodily forms
consist of paid or unpaid labour, since their production costs in either
case the same amount of labour; and that it is also immaterial whether
the commodity of A is a means of production and that of B an article of
consumption and whether one commodity has to serve as a component
part of capital after its sale while another passes into the consumption-fund
and, secundum Adam, is consumed as revenue. The use to which
the individual buyer puts his commodity does not come within the scope
of commodity-exchange, the sphere of circulation, and does not affect
the value of the commodity. This is in no wise altered by the fact that in
the analysis of the circulation of the total annual social product, the
definite use for which it is intended, the factor of consumption of the
various component parts of that product, must be taken into consideration.

In the exchange established above of (IIb)v for a portion of (IIa)s of the same value, and in the further exchanges between (IIa), and (IIb), it is by no means assumed that either the individual capitalists of IIa and
IIb or their respective totalities divide their surplus-value in the same
proportion between necessary articles of consumption and articles of
luxury. The one may spend more on this consumption, the other more
on that. On the basis of simple reproduction it is merely assumed that a
sum of values equal to the entire surplus-value is realised in the
consumption-fund. The limits are thus given. Within each department
the one may spend more in a, the other in b. But this may compensate
itself mutually, so that the capitalist groups of a and b, taken as a
whole, each participate in the same proportion in both. The value-relations —
the proportional shares of the two kinds of producers, a and b
in the total value of product II — consequently also a definite quantitative
relation between the branches of production supplying those products —
are however necessarily given in each concrete case; only the proportion
chosen as an illustration is a hypothetical one. It would not alter the
qualitative aspects if another illustration were selected; only the
quantitative determinations would be altered. But if on account of any
circumstances there arises an actual change in the relative magnitude of
a and b, the conditions of simple reproduction would also change
accordingly.

Since (IIb)v is realised in an equivalent part of (IIa)s, it follows that in proportion as the luxury part of the annual product grows, as therefore
an increasing share of the labour-power is absorbed in the production of
luxuries, the reconversion of the variable capital advanced in (IIb)v
into money-capital functioning anew as the money-form of the variable
capital, and thereby the existence and reproduction of the part of the
working-class employed in IIb — the supply to them of consumer
necessities — depends upon the prodigality of the capitalist class, upon
the exchange of a considerable portion of their surplus-value for articles
of luxury.

Every crisis at once lessens the consumption of luxuries. It retards,
delays the reconversion of (IIb)v into money-capital, permitting it only
partially and thus throwing a certain number of the labourers employed
in the production of luxuries out of work, while on the other hand it thus
clogs the sale of consumer necessities and reduces it. And this without
mentioning the unproductive labourers who are dismissed at the same
time, labourers who receive for their services a portion of the capitalists’
luxury expense fund (these labourers are themselves pro tanto luxuries),
and who take part to a very considerable extent in the consumption of
the necessities of life, etc. The reverse takes place in periods of
prosperity, particularly during the times of bogus prosperity, in which the
relative value of money, expressed in commodities, decreases also for
other reasons (without any actual revolution in values), so that the prices
of commodities rise independently of their own values. It is not alone the
consumption of necessities of life which increases. The working-class
(now actively reinforced by its entire reserve army) also enjoys momentarily
articles of luxury ordinarily beyond its reach, and those articles
which at other times constitute for the greater part consumer
“necessities” only for the capitalist class. This on its part calls forth a
rise in prices.

It is sheer tautology to say that crises are caused by the scarcity of
effective consumption, or of effective consumers. The capitalist system
does not know any other modes of consumption than effective ones,
except that of sub forma pauperis or of the swindler. That commodities
are unsaleable means only that no effective purchasers have been found
for them, i.e., consumers (since commodities are bought in the final
analysis for productive or individual consumption). But if one were to
attempt to give this tautology the semblance of a profounder justification
by saying that the working-class receives too small a portion of its own
product and the evil would be remedied as soon as it receives a larger
share of it and its wages increase in consequence, one could only
remark that crises are always prepared by precisely a period in which
wages rise generally and the working-class actually gets a larger share of
that part of the annual product which is intended for consumption. From
the point of view of these advocates of sound and “simple” (!) common
sense, such a period should rather remove the crisis. It appears, then,
that capitalist production comprises conditions independent of good or
bad will, conditions which permit the working-class to enjoy that relative
prosperity only momentarily, and at that always only as the harbinger of
a coming crisis. [Ad notam for possible followers of the Rodbertian theory of crises.—F.E.]

We saw a while ago that the proportion between the production of
consumer necessities and that of luxuries requires the division of II(v + s)
between IIa and IIb, and thus of IIc between (IIa)c and (IIb)c. Hence this division affects the character and the quantitative relations of production
to their very roots, and is an essential determining factor of its general
structure.

Simple reproduction is essentially directed toward consumption as an
end, although the grabbing of surplus-value appears as the compelling
motive of the individual capitalists; but surplus-value, whatever its
relative magnitude may be, is after all supposed to serve here only for
the individual consumption of the capitalist.

As simple reproduction is a part, and the most important one at that,
of all annual reproduction on an extended scale, this motive remains as
an accompaniment of and contrast to the self-enrichment motive as
such. In reality the matter is more complicated, because partners in the
loot — the surplus-value of the capitalist — figure as consumers independent of him.

V. The Mediation of Exchange by the Circulation of Money

So far as we have analysed circulation up to the present, it proceeded
between the various classes of producers as indicated in the following
scheme:

This disposes of the circulation of IIc, equal to 2,000, which is
exchanged for I (1,000v + 1,000s).

Leaving aside for the present the 4,000 Ic there still remains the
circulation of v + s within class II. Now II(v + s) is divided between the
sub-classes IIa and IIb in the following manner:

2) II. 500v + 500s = a (400v + 400s) + b (100v + 100s).

The 400v (a) circulates within its own sub-class; the labourers paid
with it buy from their employers, the capitalists IIa, necessary means of
subsistence produced by themselves.

Since the capitalists of both sub-classes spend three-fifths of their
surplus-value in products of IIa (necessities) and two-fifths in products of
IIb (luxuries), the three-fifths of the surplus-value of a, or 240, are
consumed within the sub-class IIa itself; likewise, two-fifths of the
surplus-value of b (produced and existing in the form of articles of
luxury), within the sub-class IIb.

There remains to be exchanged between IIa and IIb: On the side of
IIa: 160s;

On the side of IIb: 100v + 60s. These cancel each other. With their 100, received in the form of money wages, the labourers of IIb buy
necessities of life in that amount from IIa. The IIb capitalists likewise
buy necessities from IIa to the amount of three-fifths of their surplus-value,
or 60. The IIa capitalists thus obtain the money required for
investing, as above assumed, two-fifths of their surplus-value, or 160s,
in luxuries produced by IIb (100, held by the IIb capitalists as a product
replacing the wages paid by them, and 60s). The scheme for this is
therefore:

3) II

a.

// 400v // + // 240s // +

160s

b.

. . . . . . . . . . . .

100v + 60s

+ //40s//

the bracketed items circulating and being consumed only within their
own sub-class.

The direct reflux of the money-capital advanced in variable capital,
which takes place only in the case of the capitalist department IIa which
produces necessities of life, is but an expression, modified by special
conditions, of the previously mentioned general law that money
advanced to the circulation by producers of commodities returns to them
in the normal course of commodity circulation. From this it incidentally
follows that if any money-capitalist at all stands behind the producer of
commodities and advances to the industrial capitalist money-capital (in
the strictest meaning of the word, i.e., capital-value in the form of
money), the real point of reflux for this money is the pocket of this
money-capitalist. Thus the mass of the circulating money belongs to that
department of money-capital which is organised and concentrated in the
form of banks, etc., although the money circulates more or less through
all hands. The way in which this department advances its capital
necessitates the continual final reflux to it in the form of money,
although this is once again brought about by the reconversion of the
industrial capital into money-capital.

The circulation of commodities always requires two things:
Commodities which are thrown into circulation and money which is
likewise thrown into it. “The process of circulation ... does not, like
direct barter of products, become extinguished upon the use-values
changing places and hands. The money does not vanish on dropping out
of the circuit of the metamorphosis of a given commodity. It is
constantly being precipitated into new places in the arena of circulation
vacated by other commodities,” etc. (Vol. I, Ch. III.).

For instance in the circulation between IIc and I(v + s) we assumed that II had advanced £500 in money for it. In the innumerable processes of circulation, into which the circulation between large social groups of
producers resolves itself, representatives of the various groups will at
various times be the first to appear as buyers, and hence throw money
into circulation. Quite apart from particular circumstances, this is
necessitated by the difference, if nothing else, in the periods of
production, and thus of the turnovers, of the various commodity-capitals.
So with these £500 II buys from I means of production of the same
value and I buys from II articles of consumption valued at £500. Hence
the money flows back to II, but this department does not in any way
grow richer by this reflux. It had first thrown £500 in money into
circulation and drew commodities of the same value out of it; then it
sells £500 worth of commodities and draws the same amount of money
out of circulation; thus the £500 flow back to it. As a matter of fact, II
has thrown into circulation £500 in money and £500 in commodities,
which is equal to £1,000. It draws out of the circulation £500 in
commodities and £500 in money. The circulation requires for the
handling of £500 in I commodities and £500 in II commodities only
£500 in money; hence whoever advanced the money in the purchase of
commodities from other producers recovers it when selling his own. Consequently
if I had at first bought commodities from II for £500, and later
sold to II commodities of the value of £500, these £500 would have
returned to I instead of to II.

In class I the money invested in wages, i.e., the variable capital
advanced in the form of money, does not return directly in this form but
indirectly, by a detour. But in II the £500 of wages return directly from
the labourers to the capitalists, and this return is always direct in the
case where purchase and sale take place repeatedly between the same
persons in such a way that they are acting alternately as buyers and
sellers of commodities. The capitalist of II pays for the labour-power in
money; he thereby incorporates labour-power in his capital and assumes
the role of an industrial capitalist in relation to his labourers as wage-earners,
but does so only by means of this act of circulation, which is for
him merely a conversion of money-capital into productive capital.
Thereupon the labourer, who in the first instance was a seller, a dealer
in his own labour-power, appears in the second instance as a buyer, a
possessor of money, in relation to the capitalist, who now acts as a
seller of commodities. In this way the capitalist recovers the money
invested by him in wages. As the sale of these commodities does not
imply cheating, etc., but is an exchange of equivalents in commodities
and money, it is not a process by which the capitalist enriches himself.
He does not pay the labourer twice, first in money and then in commodities.
His money returns to him as soon as the labourer exchanges it
for his commodities.

However, the money-capital converted into variable capital, i.e., the
money advanced for wages, plays a prominent role in the circulation of
money itself, since the labourers must live from hand to mouth and
cannot give the industrial capitalists credit for any length of time. For
this reason variable capital must be advanced in the form of money
simultaneously at innumerable territorially different points in society at
certain short intervals, such as a week, etc.—in periods of time that
repeat themselves rather quickly (and the shorter these periods, the
smaller relatively is the total amount of money thrown at one time into
circulation through this channel) — whatever the various periods of
turnover of the capitals in the different branches of industry. In every
country with a capitalist production the money-capital so advanced
constitutes a relatively decisive share of the total circulation, the more so
as the same money, before its reflux to its point of departure, passes
through the most diverse channels and functions as a medium of
circulation for countless other businesses.

Now let us consider the circulation between I(v + s) and II from a
different angle.

Capitalists I advance £1,000 in the payment of wages. With this
money the labourers buy £1,000 worth of means of subsistence from
capitalists II. These in turn buy for the same money means of production
from capitalists I. Capitalists I thus get back their variable capital in the
form of money, while capitalists II have reconverted one half of their
constant capital from the form of commodity-capital into that of
productive capital. Capitalists II advance another £500 in money to get
means of production from I. The capitalists I spend this money on
articles of consumption from II. These £500 thus return to capitalists II.
They advance this amount again in order to reconvert the last quarter of
their constant capital, converted into commodities, into its productive
bodily form. This money flows back to I and once more withdraws
articles of consumption of the same amount from II. Thus the £500
return to II. The capitalists II are now as before in possession of £500 in
money and £2,000 in constant capital, the latter having been newly
converted from the form of commodity-capital into that of productive
capital. By means of £1,500 a quantity of commodities worth £5,000
has been circulated. Namely: 1) I pays £1,000 to his labourers for their
labour-power of the same value; 2) With these same £1,000 the
labourers buy means of subsistence from II; 3) With the same money II
buys means of production from I, thereby restoring to I variable capital
to the amount of £1,000 in the form of money; 4) II buys £500 worth
of means of production from I; 5) With the same £500 I buys articles of
consumption from II; 6) With the same £500 II buys means of
production from I; 7) With the same £500 I buys means of subsistence
from II. Thus £500 have returned to II, which had thrown them into
circulation besides its £2,000 in commodities and for which it did not
withdraw from circulation any equivalent in commodities.

The exchange therefore takes the following course:

1) I pays £1,000 in money for labour-power, hence for commodities
equal to £1,000.

2) The labourers buy with their wages amounting in money to
£1,000 articles of consumption from II; hence commodities equal to
£1,000.

3) With the £1,000 received from the labourers II buys means of
production of the same value from I; hence commodities equal to
£1,000.

In this way the £l.000 have returned to I as the money-form of its
variable capital.

4) II buys £500 worth of means of production from I, hence
commodities equal to £500.

5) With the same £500 I buys articles of consumption from II; hence
commodities equal to £500.

6) With the same £500 II buys means of production from I; hence
commodities equal to £500.

7) With the same £500 I buys articles of consumption from II; hence
commodities equal to £500.

Total amount of commodity-values exchanged: £5,000.

The £500 advanced by II for the purchase have returned to it.

The result is as follows:

1) I possesses variable capital in the form of money to the amount of
£1,000, which it originally advanced to the circulation. It furthermore
expended £1,000 for its individual consumption, in the shape of its own
products; i.e., it has spent the money which it had received for the sale
of means of production to the amount of £1,000.

On the other hand the bodily form into which the variable capital
existing in the form of money must be transformed, i.e., labour-power,
has been maintained, reproduced and again made available by
consumption as the sole article of trade of its owners, which they must
sell in order to live. The relation of wage-labourers and capitalists has
likewise been reproduced.

2) The constant capital of II is replaced in kind, and the £500
advanced by the same II to the circulation have returned to it. As for the
labourers I, the circulation is the simple one of C—M—C:C' (labour-power) —M2 (£1,000, money-form of variable capital I) —C3 (necessities of life to the amount of £1,000); these £1,000 convert into money to the same amount of value the constant capital II existing in the form of commodities, of means of subsistence.

As for the capitalists II, the process is C— M, the transformation of a
portion of their commodity-product into the money-form, from which it is
reconverted into the constituents of productive capital, namely into a
portion of the means of production required by them.
In the money advance (£500) made by capitalists II for the purchase
of the other parts of the means of production, the money-form of that
portion of II which exists as yet in the form of commodities (articles of
consumption) is anticipated; in the act M — C, in which II buys with M,
and C is sold by I, the money (II) is converted into a portion of the
productive capital, while C (I) passes through the act C — M, changes
into money, which however does not represent any component part of
capital-value for I, but surplus-value converted into money and expended
solely for articles of consumption.

In the circuit M — C ... P ... C' — M', the first act, M — C, is that of one capitalist, the last, C' — M' (or part of it), is that of another; whether the
C, by which M is converted into productive capital, represents a
component of constant capital, of variable capital, or surplus-value for
the seller of C (who exchanges this C for money), is wholly immaterial
for the commodity circulation itself.

Class I, so far as concerns the component v + s of its commodity-product,
draws more money out of the circulation than it has thrown in.
In the first place, the £1,000 of variable capital return to it; in the
second place, it sells means of production worth £500 (see above,
exchange No. 4); one half of its surplus-value is thus turned into money;
then (exchange No. 6) it sells once more £500 worth of means of
production, the second half of its surplus-value, and thus the entire
surplus-value is withdrawn from circulation in the shape of money.
Hence in succession: 1) variable capital reconverted into money, equal
to £1,000; 2) one half of the surplus-value turned into money, equal to
£500; 3) the other half of the surplus-value, equal to £500; altogether
1,000v + 1,000s turned into money, equal to £2,000. Although I threw only £1,000 into circulation (aside from those exchanges which promote the reproduction of I and which we shall have to analyse later), it has
withdrawn double that amount from it. Of course s passes into other
hands, (II), as soon as it has been converted into money, by being spent
for articles of consumption. The capitalists of I withdrew only as much in
money as they threw into it in value in the form of commodities; the fact
that this value is surplus-value, i.e., that it does not cost the capitalists
anything, does not alter the value of these commodities in any way; so
far as the exchange of values in commodity circulation is concerned, that
fact is of no consequence at all. The existence of surplus-value in money
is of course transient, the same as all other forms which the advanced
capital assumes in its metamorphoses. It lasts no longer than the
interval between the conversion of commodities I into money and the
subsequent conversion of the money I into commodities II.

If the turnovers had been assumed to be shorter — or, from the point
of view of the simple circulation of commodities, the circulation of
money more rapid — even less money would be ample to circulate the
exchanged commodity-values; the amount is always determined — if the
number of successive exchanges is given — by the sum of the prices, or
the sum of values, of the circulating commodities. It is immaterial in
what proportion this sum of values consists of surplus-value on the one
hand, and of capital-value on the other.

If the wages of I, in our illustration, were paid four times per year, we
should have 4 times 250, or 1,000. Hence £250 in money would
suffice for the circulation Iv — ½ IIc, and for that between the variable capital Iv and the labour-power I. Likewise, if the circulation between I and II were to take place in four turnovers, it would require only £250, or in the aggregate a sum of money, or a money-capital, of £500 for the circulation of commodities amounting to £5,000. In that case the
surplus-value would be converted into money four times successively,
one-quarter each time, instead of twice successively, one half each time.

If I instead of II should act as buyer in exchange No. 4 and expend
£500 for articles of consumption of the same value, II would buy means
of production with the same £500 in exchange No. 5; 6) I buys articles
of consumption with the same £500; 7) II buys means of production
with the same £500 so that the £500 finally return to I, the same as
before to II. The surplus-value is here converted into money by means of
the money spent by the capitalist producers themselves for their
individual consumption. This money represents the anticipated revenue,
the anticipated receipts from the surplus-value contained in the
commodities still to be sold. The surplus-value is not converted into
money by the reflux of the £500; for aside from £1,000 in the form of
commodities Iv, I threw £500 in money into circulation at the close of exchange No. 4, and this was additional money, so far as we know, and
not the proceeds from the sale of commodities. If this money flows back
to I, I merely gets back its additional money, and does not thereby
convert its surplus-value into money. The conversion of the surplus-value
I into money takes place only by the sale of the commodities Is, in which
it is incorporated, and lasts each time only until the money obtained by
the sale of the commodities is expended anew in the purchase of articles
of consumption.

With additional money (£500) I buys articles of consumption from II;
this money was spent by I, which holds its equivalent in II commodities;
the money returns for the first time by the purchase from I by II of
commodities to the amount of £500; in other words, it returns as the
equivalent of the commodities sold by I, but these commodities do not
cost I anything, they constitute surplus-value for I, and thus the money
thrown into circulation by this very department turns its own surplus-value
into money. On buying for the second time (No. 6) I has likewise
obtained its equivalent in II commodities. Take it, now, that II does not
buy (No. 7) means of production from I. In that case I would have
actually paid £1,000 for articles of consumption, thereby consuming its
entire surplus-value as revenue; namely, 500 in its own I commodities
(means of production) and 500 in money: on the other hand, it would
still have £500 in its own commodities (means of production) in stock,
and would have got rid of £500 in money.

On the contrary II would have reconverted three-fourths of its
constant capital from the form of commodity-capital into that of
productive capital; but one-fourth (£500) would be held by it in the form
of money-capital, actually in the form of idle money, or of money which
has suspended its function and is held in abeyance. Should this state of
affairs last for any length of time, II would have to cut down its scale of
reproduction by one-fourth.

However the 500 in means of production, which I has on its hands,
are not surplus-value existing in the form of commodities; they occupy
the place of the £500 advanced in money, which I possessed aside from
its £1,000 of surplus-value in commodity-form. In the form of money,
they are always convertible; as commodities they are momentarily
unsaleable. So much is evident: that simple reproduction — in which
every element of productive capital must be replaced in both II and I —
remains possible in this case only if the 500 golden birds, which I first
sent flying, return to it.

If a capitalist (we have only industrial capitalists still to deal with
here, who are the representatives of all others) spends money for articles
of consumption, he is through with it, it goes the way of all flesh. It can
flow back to him only if he fishes it out of circulation in exchange for
commodities, i.e., for his commodity-capital. As the value of his entire
annual commodity-product (his commodity-capital), so that of every one
of its elements, i.e., the value of every individual commodity, is divisible,
as far as he is concerned, into constant capital-value, variable capital-value,
and surplus-value. The conversion into money of every individual
commodity (as elements constituting the commodity-product) is
consequently at the same time such a conversion of a certain portion of
the surplus-value contained in the entire commodity-product. In this
case, then, it is literally true that the capitalist himself threw the money
into circulation — when he spent it on articles of consumption — by which
his surplus-value is converted into money, or realised. Of course it is not
a question of the identical coins but of a certain amount of hard cash
equal to the one (or to a portion of the one) which he had previously
thrown into circulation to satisfy his personal wants.

In practice this occurs in two ways. If the business has just been
opened, in the current year, it will take quite a while, at least a few
months, before the capitalist is able to use any portion of the receipts of
his business for his personal consumption. But for all that he does not
suspend his consumption for a single moment. He advances to himself
(immaterial whether out of his own pocket or by means of credit from
the pocket of somebody else) money in anticipation of surplus-value still
to be snatched by him; but in doing so he also advances a circulating
medium for the realisation of surplus-value to be realised later. If, on the
contrary, the business has been running regularly for a longer period
payments and receipts are distributed over different terms throughout
the year. But one thing continues uninterruptedly, namely, the
consumption of the capitalist, which anticipates, and whose volume is
computed on a definite proportion of, the customary or estimated
revenue. With every portion of commodities sold, a portion of the
surplus-value to be produced annually is also realised. But if during the
entire year only as much of the produced commodities is sold as is
required to replace the constant and variable capital-values contained in
them, or if prices were to fall to such an extent that only the advanced
capital-value contained in the entire annual commodity-product should
be realised on its sale, then the anticipatory character of the expenditure
of money in expectation of future surplus-value would be clearly
revealed. If our capitalist fails, his creditors and the court investigate
whether his anticipated private expenditures were in proper proportion to
the volume of his business and to the receipt of surplus-value usually or
normally corresponding to it.

So far as the entire capitalist class is concerned, the proposition that
it must itself throw into circulation the money required for the realisation
of its surplus-value (correspondingly also for the circulation of its capital,
constant and variable) not only fails to appear paradoxical, but stands
forth as a necessary condition of the entire mechanism. For there are
here only two classes: the working-class disposing only of its labour-power,
and the capitalist class, which has a monopoly of the social
means of production and money. It would rather be a paradox if the
working-class were to advance in the first instance from its own
resources the money required for the realisation of the surplus-value
contained in the commodities. But the individual capitalist makes this
advance only by acting as a buyer, expending money in the purchase of
articles of consumption or advancing money in the purchase of elements
of his productive capital, whether of labour-power or means of
production. He never parts with his money unless he gets an equivalent
for it. He advances money to the circulation only in the same way as he
advances commodities to it. He acts in both instances as the initial point
of their circulation.

The actual process is obscured by two circumstances:

1) The appearance in the process of circulation of industrial capital of
merchant’s capital (the first form of which is always money, since the merchant as such does not create any “product” or “commodity”) and of money-capital as an object of manipulation by a special kind of capitalists.

2) The division of surplus-value – which must always be first in the
hands of the industrial capitalist – into various categories, as vehicles of
which there appear, aside from the industrial capitalist, the landlord (for
ground-rent), the usurer (for interest), etc., furthermore the government
and its employees, rentiers, etc. These gentry appear as buyers vis-à-vis
the industrial capitalist and to that extent as converters of his
commodities into money; they too throw “money” pro parte into the circulation and he gets it from them. But it is always forgotten from what
source they derived it originally, and continue deriving it ever anew.